Posted: ’06-FEB-07 08:00′ GMT – – Archive

Poor policies, coupled by a fixed exchange rate, have weighed heavily on Zimbabwe’s gold production whose 2006 output slumped by 21%, realizing a mere 11 tonnes compared to 14 tonnes in 2005.

Zimbabwe’s Reserve Bank governor Gideon Gono recently released the figures, which were in line with projections made by independent analysts, who have blamed poor polices and a fixed exchange rate. Ironically, early last month the Minister of Home Affairs Kembo Mohadi denied a downturn in gold production in the country.

Economic analysts also blamed the slump in output on erratic payments to gold miners by the Reserve Bank of Zimbabwe and the Fidelity Printers and refineries, which have reneged on a commitment to pay gold producers in foreign currency, according to the Zimbabwe Independent Newspapers.

Zimbabwe Independent said Gono–“who has refused to heed calls from the sector for a devaluation of the local currency”–did not acknowledge payment problems to miners as part of the reason for the decline in annual production.

The official stance maintains that illegal miners pillaged the country’s huge amounts of gold and smuggled it into South Africa. The slump has also been attributed to aging equipment as well as reduced exploration and mine development.

Gold miners complained that failure by Fidelity to remit money to them on time has resulted in their inability to import critical spare parts and capital equipment to repair or replace antiquated machinery now used for mining. Analysts anticipate that Zimbabwe, currently wallowing in forex shortages, will register another downturn in gold production if the exchange-rate regime did not change.

The government of Robert Mugabe is accused of artificially forcing the exchange rate to remain fixed at Z$250 to the U.S. dollar.

Media reports indicate that Fidelity Printers and Refineries – the only company entrusted to buy gold in the country and which is also an arm of the reserve bank – has failed to pay gold producers US$9 million and Z$610 million for gold delivered between September 7, 2006, and November 2, 2006. The amount is believed to have soared by now.

The highest gold tonnage Zimbabwe has produced in recent times was 29 tonnes in 1999.


While the general output of gold dwindled, other mines in the southern African country did extremely well, registering an upsurge in gold production. Renco Mines registered a 90% increase in gold production. Media reports quoted figures by RioZim stating that Renco produced 7,876 ounces for the fourth quarter of 2006, up from 4,115 ounces.

Zimbabwe’s news agency New Ziana reported that the nation’s largest gold producer Metallon Gold Zimbabwe (MGZ) produced 40 percent of the country’s total 2006 gold output of 11,000 tonnes. Owned by South African business magnate Mzi Khumalo, MGZ operates five mines in the country

MGZ Chief Executive Collen Gura said that, despite the adverse economic environment, the mining company produced 140,000 ounces of gold last year against a target of 160,000 ounces for the period with two of its mines, How and Shamva, producing 66 percent of the gold.

“Given the modus operandi, we are doing our best,” Gura told New Ziana. “We managed 140 000 ounces of gold for 2006 and this is not a bad production level.”

Gura said the company expects to produce 16 tonnes of gold within the next five years, and diversify its operations by venturing into other sectors, adding they were already looking at a number of sectors in which to invest.

The chief executive, however, bemoaned the decision by the reserve bank not to pay MGZ in foreign currency.

“We are not being paid the foreign currency portion of the gold we are delivering for reasons only known to the monetary authorities and we are in a quandary,” Gura lamented. “If the RBZ resumes payments to our foreign currency account for gold deliveries then we can find an escape door.”

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